Inventory control is a delicate balance of carrying the optimal amount of inventory. Carry too little inventory, and you risk not having enough goods on hand to meet your customer’s demands. Carry too much inventory, and you risk tying up your money and hurting your cash flow. Establishing inventory control guidelines helps you keep track of your inventory inflows and outflows. You can identify which inventory items sell quickly and which ones stay on your shelves for too long. You can adjust your inventory buying habits so you keep less on hand while still meeting your customer needs.

Frequent Inventory Counts

Inventory control starts with knowing how much of each item you already have on hand. You can make the counting easier by grouping similar items together in your storeroom or warehouse. Have your employees take an accurate count of your inventory items. Look for counting errors that could result in an incorrect inventory count. Make frequent counts to better gauge your inventory flow. Compare the actual count with your book count and make the adjustments so that your book count reflects the actual inventory on hand.

Control Purchase Costs

Keeping your inventory costs low is more than just buying from the cheapest supplier. It also includes handling costs, return and restocking charges, and added shipping or freight costs. Another overlooked aspect is the supplier’s on-time delivery history. Buying from a vendor that always delivers your orders on time eliminates the need to keep large supplies on hand. By considering all the factors, you may find that switching to a more efficient supplier lowers your total inventory purchase costs.

Eliminate Excess Inventory

Inventory that sits gathering dust on your shelves or growing obsolete in a warehouse drains your business profits. Investigate if the cause of your excess inventory stems from placing orders out of habit or if sales have slowed. If you routinely place inventory orders, cut back or eliminate any new orders until you sell your backlogged items. If sales are slow and you have other outlets, consider selling the inventory at another store. If you have customers who previously purchased your overstocked inventory, let them know you have a supply on hand and are willing to make a deal.

Set Reorder Limits

You can avoid being under- or overstocked on inventory items by establishing maximum and minimum reorder limits. The maximum limit is the greatest amount of an inventory item you keep on hand that meets your customer needs without becoming overstocked. The minimum limit is the point where your supply becomes so low that you must reorder or risk running out. You can analyze your past sales to set your maximum and minimum reorder points. Adjust these limits based on seasonal demands and changes in customer ordering and purchasing habits.

About the Author

Based in St. Petersburg, Fla., Karen Rogers covers the financial markets for several online publications. She received a bachelor's degree in business administration from the University of South Florida.